Which is More Expensive – Tax Cuts or Free Tuition?
Last week, we took a look at the total cost of the state’s tax cuts of the past few years. According to state officials, cuts to the food tax and business taxes will cost the state $360 million in lost revenue this year, with more than half of the loss coming from the cuts to the corporate net income tax and the elimination of the business franchise tax.
Now if $360 million sounds like a lot, that’s because it is. $360 million is nearly 12% of FY 2015’s total general revenue, and is nearly as much as we appropriate out of general revenue for the entire Department of Military Affairs and Public Safety, which includes corrections spending.
But there is one really big thing the state could have done with the revenue it gave up through tax cuts. It could have given free tuition to every in-state college student. While free tuition for all of the state’s in-state college students sounds expensive, it would actually be cheaper than the tax cuts.
The table below shows the estimated number of in-state undergraduate students at each of the state’s higher education bodies, including both four-year and two-year schools, as well as tuition and fees for one academic year for a full-time in-state student.
If the state wanted to, it could pay for full tuition and fees for all of its in-state undergraduate college students for less than $250 million, far less than the $360 million in tax cuts. And, if anything, it would probably cost less than that. First, the $250 million includes federal grants and aid that the students would still be eligible for to help pay their tuition. In addition, the state already pays nearly $30 million per year in PROMISE scholarships, which is included in the total.
The state’s budget is all about priorities. By prioritizing our ranking on some “tax climate” index, the state missed out on an opportunity to fundamentally change the composition of its workforce and its future.